The distribution network in Japan

Evolution of the Sector: According to the latest USDA Foreign Agricultural Service report, in 2021, the total value of all retail food and beverage sales in Japan was $467.20 billion an overall decrease of 2.3% from the previous year. The food processing industry produced $216 billion in food and beverage products in 2021. Supermarkets account for the majority of food retail sales, at 74%, but the fast growing convenience shop sector now accounts for 14.4% of sales. Ready-to-eat (REM) or take-away food products represent a growing area. Although Japan is a huge market, it is highly fragmented. The Japanese Food and Beverage (F&B) retail industry includes supermarkets, general merchandise stores, department stores, convenience stores, drugstores, and the internet.

Japan's general merchandise stores (GMS), offer shoppers the convenience of one-stop shopping for groceries, perishables, clothing, household goods, furniture, and electrical goods. GMS's are operated by major national chains that have nationwide networks with hundreds of outlets and typically rely on centralised purchasing. They often purchase foreign products via trading companies.

Supermarkets (SM) stores are smaller in size than GMS's and are more specialised in food and household goods. Supermarkets are facing higher purchasing costs than GMSs. They are seeking ways to stay competitive through product/service differentiation, private brand development, and global sourcing. To gain economies of scale, regional supermarkets are forming alliances through joint merchandising companies with non-competing retailers.

Department store sales have been slowly declining in recent years due to increasing competition with other retailers.

Convenience stores (CVS) are an extremely important sales channel in Japan. They have limited floor space, about 100 m² on average, and typically stock about 3,000 products. Convenience stores derive their competitive advantage from high turnover and efficient supply chains. Convenience stores are notably competing strongly by offering attractive consumer food service options, particularly as fast food offers high potential profits.
Market share: Retailers with the highest food retail sales in 2021 (USDA, latest data available):
•    Supermarket: 345.59 billion dollars – 74% share of sales
•    Convenience Store: 67.18 billion dollars - 14.4% share of sales
•    General Merchandise Store: estimated at 24.78 billion dollars
•    Department Store: 13.98 billion dollars - 3% share of sales
•    Drugstore: 20.34 billion dollars - 4.4% share of sales
•    Internet: 20.70 billion dollars in 2020 (latest data available) - 4.3% share of sales
The largest retail outlet is Aeon Co. Ltd, leading player in supermarkets. The second largest retailer in terms of overall sales value is Seven & I Holdings, which operates Ito-Yokado, which is a convenience store business. The well-known U.S. brand retailers Costco and Walmart are also successful in Japan.
Retail Sector Organisations: Japan Retailers Association
Japan Department Store Association
Japan Council of Shopping Centres

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